Correlation Between Air France and Copa Holdings
Can any of the company-specific risk be diversified away by investing in both Air France and Copa Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Air France and Copa Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air France KLM and Copa Holdings SA, you can compare the effects of market volatilities on Air France and Copa Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Air France with a short position of Copa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Copa Holdings.
Diversification Opportunities for Air France and Copa Holdings
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and Copa is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM and Copa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copa Holdings SA and Air France is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Air France KLM are associated (or correlated) with Copa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copa Holdings SA has no effect on the direction of Air France i.e., Air France and Copa Holdings go up and down completely randomly.
Pair Corralation between Air France and Copa Holdings
Assuming the 90 days horizon Air France KLM is expected to under-perform the Copa Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air France KLM is 1.18 times less risky than Copa Holdings. The pink sheet trades about -0.33 of its potential returns per unit of risk. The Copa Holdings SA is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 9,915 in Copa Holdings SA on August 31, 2024 and sell it today you would lose (580.00) from holding Copa Holdings SA or give up 5.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air France KLM vs. Copa Holdings SA
Performance |
| Timeline |
| Air France KLM |
| Copa Holdings SA |
Air France and Copa Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France and Copa Holdings
The main advantage of trading using opposite Air France and Copa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France position performs unexpectedly, Copa Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Copa Holdings will offset losses from the drop in Copa Holdings' long position.| Air France vs. Seychelle Environmtl | Air France vs. Energy and Water | Air France vs. One World Universe | Air France vs. Vow ASA |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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